The Effect of Environmental Activism on the Long-run Market Value of a Company: A Case Study

Lewis, Robert L.; O’Donovan, Gary; Willett, Roger

doi:10.1007/s10551-015-2686-1

Cited by 6 publications

(5 citation statements)

References 40 publications

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“…Albuquerque et al (2020) examine the effects of the COVID-19 pandemic on firm performance using the Refinitiv environmental and social performance data for all US stocks, and provide evidence that better rated companies have significantly lower return volatility during the first quarter of 2020. The findings of Freedman and Jaggi (1988); Cho et al (2015) and Lewis et al (2017) also differ from some of the findings reviewed in the preceding sections. Freedman and Jaggi (1988) hypothesize that pollution-related sustainability information should be meaningfully reflected in disclosing firms' economic performance.…”

Section: Voluntary Esg Regulationscontrasting

confidence: 71%

“…Existing studies document that voluntary ESG reduces cost of capital and financing constraints (Cheng et al, 2014;Dhaliwal et al, 2011;El Ghoul et al, 2011;Gupta, 2018), improves analysts' coverage and forecast accuracy (Bernardi & Stark, 2018;Dhaliwal et al, 2012;Gao et al, 2015), enhances investment efficiency and firm value (Cahan et al, 2016;Benlemlih & Bitar, 2018;Plumlee et al, 2015;Zuraida et al, 2018) and reduces firm risk (return volatility) (Albuquerque et al, 2019;Albuquerque et al, 2020;Bannier et al, 2022;Diemont et al, 2016;Hoepner et al, 2022;Oikonomou et al, 2012;Sassen et al, 2016;Monti et al, 2019). However, other studies report that voluntary ESG does not impact firm performance (Freedman & Jaggi, 1988), is not positively valued by capital providers (Cho et al, 2015), increases corporate leverage (Limkriangkrai, et al, 2017), may be detrimental to corporate investment (Bhandari & Javakhadze, 2017), and may harm the financial well-being of companies especially where companies ignore to consider the concerns of environmental activists (Lewis et al, 2017).…”

Section: Voluntary Esg Regulationsmentioning

confidence: 99%

“…Cho et al (2015) report that environmental and social disclosure is not positively valued by investors. According to Lewis et al (2017), environmental activism can harm a company's financial well-being when the company's management ignores the concerns of these stakeholders. Freedman and Jaggi (1988) In summary, the foregoing studies employ voluntary ESG in their analysis of its impact on firm outcomes.…”

Section: Voluntary Esg Regulationsmentioning

confidence: 99%

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Mandatory Environmental, Social and Governance (ESG) Regulations: ESG Performance, Corporate Finance, and Investment

Michael¹

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This thesis investigates the relationship between cross-country mandatory environmental, social and governance (ESG) regulations and firm-level outcomes, such as ESG performance, corporate finance, and investment, for both developing and developed countries. ESG performance is initially examined to determine whether mandatory ESG regulations affect it and to what extent. Second, the study investigates the impact of mandatory ESG on corporate finance and investment. Lastly, the study explores whether mandatory ESG regulations affect firm-level outcomes based on countries' governance and economic systems, and industries. The study uses a large sample of 69,010 firm-years across 73 countries, over the period 2005 – 2020 to address the foregoing issues. In addressing the impact of mandatory ESG regulations on ESG performance, the study employs a difference-in-differences (DiD) design. The DiD technique can isolate the effect of regulatory shocks to firm-level outcomes. According to the DiD analysis conducted, cross-country mandatory ESG improves firm-level ESG performance in developed countries, but not in developing countries. The study also concludes that mandatory ESG regulations have a positive impact only on ESG components in developed countries and have a more dominant impact on environmental (E) component. The findings are robust to a range of checks and test cases, including a triple DiD design set-up and propensity score-matched sample. The study employs an investment Euler equation framework and generalised method of moments (GMM) estimators to explore how mandatory ESG impacts corporate finance and investment. Euler frameworks account for the dynamic nature of investment, whereas GMMs account for endogenous dynamics in dynamic models. The study demonstrates that mandatory ESG increases corporate investment by increasing firms' access to external funds. The findings are robust to a battery of tests, including a triple DiD design set-up, propensity score-matched sample and the parallel trends assumption. Using an investment Euler equation framework and the GMM estimators, the study explores whether the impact of mandatory ESG on corporate finance and investment is dependent on a country's governance and economic system. When mandatory ESG is affected by country factors such as governance systems and economic well-being, the effect of mandatory ESG on investment via internal finance channel persists, according to the study. However, while consistent results are found in developed countries, inconsistent results are found in developing countries. According to the study, oil, gas, and mining firms are likely to respond effectively to mandatory ESG regulations because of increased scrutiny and pressure. Overall, the findings from the study imply that cross-country mandatory ESG has had a positive impact on corporate ESG performance, finance, and investment. For firms located in developed countries, these findings hold consistently, while for those located in developing countries, the opposite holds true. Also, the study reveals that firms in the oil, gas, and mining industries effectively respond to regulatory requirements. As a result, this study provides policy makers and accountants with an understanding of how mandatory ESG impacts firm ESG activities and performance, which is crucial for regulatory reforms.

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Section: Voluntary Esg Regulationscontrasting

confidence: 71%

Section: Voluntary Esg Regulationsmentioning

confidence: 99%

Section: Voluntary Esg Regulationsmentioning

confidence: 99%

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Mandatory Environmental, Social and Governance (ESG) Regulations: ESG Performance, Corporate Finance, and Investment

Michael¹

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“…We used a mixed methods approach (Lewis et al, ) combining both qualitative and quantitative data to assess the relationships between the dimensions included in our model and to obtain more information about each one. We decided to use only secondary data (see Table ) to avoid the biases that can occur when primary data are used for business ethics research (Cowton, ).…”

Section: Methodsmentioning

confidence: 99%

CSR Dynamics in the Midst of Competing Injunctions: The case of Danone

Marais

Reynaud

Vilanova

2018

European Management Review

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This study examines how firms manage competing injunctions for corporate social responsibility (CSR) across time. We first develop a theory of CSR dynamics that accounts for the idea that a firm's actual CSR (what the firm does) and its professed CSR (what it says it does): (i) depend on both internal injunctions (a firm's identity orientation) and external injunctions (stakeholder demands); and (ii) are not necessarily constant over time, that is, there might be discernible phases of CSR. We illustrate our theory with a longitudinal case study of Danone, a French food-processing company. We show that in the midst of conflicting injunctions, Danone adopted a multiphase strategy that consisted of proactively managing opponents in the short term to better impose CSR in the long term. During the different phases, decoupling actual from professed CSR was a key instrument to maintain organizational cohesion.

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“…Empirical research on the financial effects of divestment provides ambivalent answers. A study of the anti-Gunns pulp mill campaign suggests that such selling pressure had a measurable impact (Lewis, O'Donovan, and Willett 2015). For the South African boycott, studies by Meznar et al (1998) and Wright and Ferris (1997) found that divestment announcements had a modest, short-term negative effect on stock returns for some corporations (for further mixed evidence, see also Kumar, Lamb, and Wokutch 2002;Teoh, Welch, and Wazzan 1999;Posnikoff 1997).…”

Section: Leverage-based Responsibilitymentioning

confidence: 99%

Divesting from Climate Change: The Road to Influence

Richardson

2017

Law & Policy

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Is fossil fuels divestment likely to achieve its aims? This article evaluates the rationales for divestment in terms of their capacity to give the campaign influence. It focuses on the direct effects of divestment on financial actors because divestment is a specific means of exerting influence outside of conventional political channels. In seeking to end fossil fuel industries in order to halt climate change, the campaign deploys a variety of arguments to win support and wield influence, namely, the legality of divestment and, indeed, the emerging duty to divest; investors’ moral responsibility to avoid complicity in the fossil fuel economy; investors’ moral responsibility to use their leverage against climate polluters; and the power of financial sanctions to create a business case for abandoning fossil fuels. Although in combination they may be effective, each of these asserted rationales has some limitations that may diminish the influence of the divestment movement. Moreover, the movement does not engage sufficiently with the systemic qualities of finance capitalism that must also be reckoned with in order to address broader patterns of environmental unsustainability. Although the divestment movement aspires to ultimately change government policies on climate change, it may achieve greater influence by also seeking better government regulation of the financial economy.

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The Effect of Environmental Activism on the Long-run Market Value of a Company: A Case Study

Cited by 6 publications

References 40 publications

Mandatory Environmental, Social and Governance (ESG) Regulations: ESG Performance, Corporate Finance, and Investment

Mandatory Environmental, Social and Governance (ESG) Regulations: ESG Performance, Corporate Finance, and Investment

CSR Dynamics in the Midst of Competing Injunctions: The case of Danone

Divesting from Climate Change: The Road to Influence

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